Options Trader: Monday Morning Ideas

by: Philip Davis

I’m going to be looking around trying to get my bearings today, and I wouldn’t be surprised if that’s what a lot of traders are doing.

We just came off a great couple of weeks and I’m a lot more concerned about protecting my positions than I am about trying to make more money. If I were running a fund, I already made my quarter (and my year for that matter) and the dumbest thing I could do is blow it by trying to do better. Can the markets go up from here? Sure they can, but they can also do something else, something that is not up - hard as that may be to believe after 15 out of the last 17 Dow sessions were positive with the two losers giving up just 110 points out of 750 points gained.


That’s a pretty good run! When a roulette wheel comes up black 15 out of 17 times, do we bet on red or do we assume the wheel is broken and keep betting black? I don’t know the answer to that one - I’m just asking, but one thing I do know is that we tend to end up watching to see if the discrepancy continues and, if it does start to look like an easy bet, we get more and more tempted to jump in. This is how money comes off the sidelines, no one wants to miss out on a "sure thing."

Japan was a sure thing over the weekend and our iShares MSCI Japan Index's (NYSEARCA:EWJ) should do well as the Nikkei put on 274 points of catch-up this morning with a nice tech rally leading the way. Give a little credit to Spider Man, which gave Sony Corp. (NYSE:SNE) a 2% shot in the arm as it took in $375M in its first Global weekend (also very good for our IMAX Corporation (NYSE:IMAX) shares!). PetroChina Company Limited (NYSE:PTR) jumped another 4.7% in Hong Kong and the miners are staging a comeback as the rest of the world shrugs off weak U.S. jobs data.

Our man Sarkozy won the French elections, and that will be great news for our TASER International Inc. (NASDAQ:TASR) play, but let’s keep an eye on that $10 mark and consider our options this morning. We do have the Cramer bandwagon effect to look forward to this morning, so we may be out and back in this one today! European stocks were fairly flat this morning and the FTSE was closed today. BAE Systems made a $3.5Bn bid for AH (+10%) and kudos to Happy Trading and OptionDragon who caught this thing early Friday morning.

Our deal of the day at home is Alcoa Inc.'s (NYSE:AA) $27Bn (+30%) offer for Alcan Inc. (NYSE:AL), which is so smart for AA that it may boost its stock as well. This deal is marked as hostile, but should turn a lot friendlier fast as AL shareholders are looking at a double off their October low. Our week here is going to be all about Wednesday’s FOMC statement, so we’ll just be sitting here watching the wheel go round until then. But let’s keep an eye on the levels - they may still be tilted in our favor:















Dow 13,264 23 12,468 12,600 13,000 13,500
Transports 2,897 -2 2,825 2,900 3,000 3,250
S&P 1,505 3 1,430 1,460 1,500 1,550
NYSE 9,793 39 9,218 9,465 9,600 10,000
Nasdaq 2,572 6 2,454 2,500 2,600 2,750
SOX 505 5 477 490 500 560
Russell 832 4 803 820 850 900
Hang Seng 20,896 55 20,200 20,600 21,000 22,000
Nikkei 17,669 274 17,400 17,500 18,300 18,500
BSE (India) 13,879 -55 13,200 14,000 14,725 15,000
DAX 7,522 5 6,900 7,000 7,400 8,000
CAC 40 6,067 -1 5,650 5,800 6,000 7,000
FTSE 6,603


6,325 6,450 6,600 7,000

US Markets

Hard to look at this chart and be bearish! Oil should be down today, as nothing blew up over the weekend and anything below $62.50 is great, but we’ve seen the extent to which they were willing to go to to protect $60 before. This was a very big technical breakdown on Friday, though, and it will be very hard to retake $63 if they don’t do it soon.

Our Cameco Corporation (NYSE:CCJ) leaps should get yet another shot in the arm as the NYMEX opens uranium trading today. This will be just another sign of long-term demand destruction that will be ignored by oil traders; they have finally convinced the world at large that the constant threat of OPEC is worse than the threat of a nuclear plant melting down.

The dollar was rejected at 82 on Friday and that had nothing to do with oil going down, but it had a lot to do with gold running back to $690 (great for our mining plays!).


Another exciting week begins!